Ways to Pay IRS Tax Debt

Posted on September 20, 2021

Ways to Pay IRS Tax Debt

Taxpayers who are looking to pay off their tax debt often wonder how they can conveniently pay their debt without getting into conflict with the IRS. There are various ways to pay IRS tax debt, but taxpayers must know that all IRS debt payment programs have restrictions that they need to consider before applying.

IRS Debt Payment Plans

There are five IRS debt payment plans that taxpayers may choose from to pay their tax debt. These are Installment Agreement, Partial Payment Installment Agreement, Offer in Compromise, Currently Not Collectible and direct payment of total tax debt to the IRS. Depending on their financial condition and convenience, taxpayers may choose from any of these five IRS debt payment plans.

IRS Debt Payment Plan: Installment Agreement

Under Installment Agreement, taxpayers can pay their tax debt in fixed monthly installments. Taxpayers may propose the amount they can conveniently pay. The IRS may or may not agree with the taxpayer’s terms for payment of tax debt. It is best to take the help of tax professionals or tax resolution companies to better negotiate the terms and conditions of the plan.

Taxpayers must keep in mind that the IRS will charge interest on the tax debt that remains to be paid even after they have qualified for Installment Agreement.

IRS Debt Payment Plan: Offer in Compromise

The most hyped and most abused IRS debt payment program is Offer in Compromise, popularly known as Pennies on the dollar. Under this agreement, taxpayers can get their tax debt reduced substantially. Although it sounds attractive, the IRS considers the financial condition of taxpayers before accepting their request for this program.

IRS Debt Payment Plan: Currently Not Collectible

Under Currently Not Collectible, the IRS postpones collection of tax debt, considering the bad financial condition of the taxpayer. Taxpayers who have no ability to pay their tax debt may request for the status of Currently Not Collectible.

IRS Debt Payment Plan: Partial Payment Installment Agreement

Taxpayers who cannot afford to pay their entire tax debt amount, but have some ability to pay the debt can request for Partial Payment Installment Agreement. Under this agreement, the IRS reduces the tax debt amount so that taxpayers may pay the remaining amount in installments and be free from tax debt.

Taxpayers who have the ability to pay the entire tax debt amount may not need help of tax lawyers. Others may find it beneficial to hire the services of a tax resolution company or a tax lawyer who can negotiate the terms of an IRS debt payment plan with the IRS to achieve a resolution that is most advantageous for them.

Tax services such as tax resolution companies pool in the services of tax attorneys, tax analysts and enrolled agents to prepare a tax case and negotiate its terms with the IRS. They help taxpayers in getting the most beneficial agreement which saves their time, money and effort.